Buying Flat Freehold: Is the Council's £11,026 Charge Fair?

A leaseholder is seeking clarity on whether the £11,026 charge from their local council to buy the freehold of their flat, which has 82.49 years remaining on the lease, is reasonable. The offer includes a new 999-year lease and a share of the freehold for a property valued at £600,000.

This situation arises as the leaseholder and their partner are in the process of acquiring the freehold, with their annual ground rent being a nominal £10 and service charge £1,206. A neighbour with a significantly longer remaining lease (172.49 years) was quoted a much lower premium of £123 for a similar purchase, attributed to their earlier 90-year lease extension.

A key concern for the leaseholder is the condition of the building's roof, which a recent structural survey flagged as requiring immediate, approximately £7,000, of repairs. The council, as the current freeholder, is responsible for roof maintenance under the existing lease. The leaseholder questions whether this impending repair cost should have factored into the freehold valuation and if obtaining a new valuation, armed with this information, could lead to a lower offer.

Experts suggest that the £11,026 figure is likely reasonable, especially given that the lease has not yet fallen below the 80-year threshold. Under current rules, leases with over 80 years remaining do not incur marriage value, which is the additional cost incurred when a lease drops below this mark, requiring a 50:50 split of this value with the freeholder. An online lease extension calculator indicated that extending a lease from this point would cost between £9,000 and £12,000, whereas waiting until the lease drops below 80 years could increase the premium to an estimated £38,000.

While the Leasehold and Freehold Reform Act (2024) promises to simplify and reduce costs for leaseholders, general advice for those with over 80 years remaining on their lease is to proceed with the purchase rather than wait for the legislation to come into effect, as future costs are not guaranteed to be lower.

Regarding the roof repairs, experts explain that while the council is responsible for the roof's maintenance, the costs are passed back to leaseholders through service charges. Therefore, the need for immediate repairs does not significantly diminish the freehold value being acquired, as leaseholders are already liable for these costs. The financial impact of deducting a portion of the roof repair cost from the freehold price is minimal when compounded over the remaining lease term.

Experts also advise that purchasing the freehold and extending the lease are fundamentally the same transaction in terms of compensating the freeholder for the loss of their reversionary interest. The process of buying the freehold and then granting a 999-year lease concurrently is standard practice and does not typically offer further cost savings beyond the initial freehold purchase. It is, however, recommended to have a long lease, even when controlling the freehold, for future saleability and to avoid potential tax implications. The freehold is usually held within a jointly controlled company.